Pittsburgh v. Parkview Construction Co.

23 A.2d 847, 344 Pa. 126

• Court: Supreme Court of Pennsylvania
• Decided: January 5, 1942
• Docket: Appeal, 152
• Status: Published

Opinions

Opinion by

Mr. Justice Stern,

This action is to recover on two instruments, one a labor and materialmen’s bond, the other a performance bond, executed by Parkview Construction Company, Inc. as principal and Continental Casualty Company as surety, the obligee being the City of Pittsburgh. The Construction Company entered into a contract with the City to do certain repaving work; the contract required the furnishing of these bonds. The condition of the labor and materialmen’s bond was that “if said principal and all sub-contractors to whom any portion of the work provided for in said contract is sub-let and all assignees of said principal and of such sub-contractors shall promptly make payment for all labor performed, services rendered, and materials furnished in the prosecution of the work provided for in said contract, or in any amendment or extension of or addition to said contract, then the above obligation shall be void; otherwise to remain in full force and effect.” The condition of the performance bond was that “if the principal shall faithfully perform the contract on his (sic) part qt the time and in the manner therein provided and satisfy all claims and demands incurred in or for the same, or growing out of the same, . . . and shall fully indemnify and save harmless the said obligee from any and all cost and damage which the said obligee may suffer by reason of failure to so do, and shall fully reimburse and repay the said obligee any and all outlay and expense which it may incur by reason of any such default, then this obligation shall be null and void; otherwise it shall remain in full force and virtue.”

According to the averments of the statement of claim the contract between the City and the Construction Company provided that the latter should take out and maintain during the life of the contract workmen’s compensation insurance for all employees employed at the site of the project, and also insurance to protect the Construction Company and sub-contractors from claims for personal injury and property damages arising from the operation; the Construction Company was not to commence work under the contract until all such insurance had been obtained and approved by the City. H. M. Kamin Agency, Inc., the use-plaintiff, furnished to the Construction Company, allegedly in reliance upon the bonds given by the latter to the City, policies covering workmen’s compensation, public liability and property damage, and contractor’s contingent public liability and property damage insurance, which policies were delivered by the Construction Company to the City in pursuance of the contract. The Construction Company agreed to pay to use-plaintiff the premiums on these policies but failed to do so, and the present action seeks recovery on the bonds for the amount thus due. Defendants filed affidavits of defense raising questions of law, contending that the bonds did not cover use-plaintiff’s claim; the court adopted this view and entered judgment in defendants’ favor. Use-plaintiff appeals.

As far as the labor and materialmen’s bond is* concerned, the court below properly determined that the policies did not fall within the description of “labor performed, services rendered, and materials furnished in the prosecution of the work provided for in said contract.” It would be extending those terms beyond their normal meaning to interpret them as embracing contracts of insurance. There is an abundance of authority * to the effect that the payment of premiums for insurance policies does not fall within the obligation of such a bond.

For some reason not apparent the court did not give consideration to the terms of the other bond on which the present suit is based, and which was conditioned on the .faithful performance of the contract between the Construction Company and the City. As one of the terms of the contract was that' the Construction Company should take out and maintain the policies, that obligation was accordingly covered by the bond, as was also the duty to “satisfy all claims and demands incurred in and for the same, or growing out of the same.” Since the Construction Company, by failure to pay the premiums, did not satisfy the claim incurred for the policies, the condition of the performance bond was breached and the surety became liable accordingly. The phraseology of the bond being clear and unambiguous, there is here no problem of interpretation. In McFarland v. Rogers, 134 Me. 228, 184 A. 391, the condition of the bond was that the contractor should “faithfully perform the contract on his part, and satisfy all claims and demands incurred for the same”; the contract provided that the contractor should maintain certain insurance. It was held that the surety on the bond was liable for the premiums on the policies. Similarly, in Building Contractors’ Limited Mutual Liability Insurance Co. v. Southern Surety Co., 185 Wis. 83, 200 N. W. 770, under an identical provision, the performance bond was held to cover the premiums for the insurance which the contractor was required by the building contract to maintain. And in Merchants Mutual Casualty Co. v. United States Fidelity & Guaranty Co., 253 App. Div. 151, 2 N. Y. S. (2d) 370, the same conclusion was reached where the bond contained slightly different but substantially similar language.

Under the now well settled law of the state, persons who, like use-plaintiff, have claims against a contractor and are within the terms of the performance bond have a right of action thereon as beneficiaries of the obligation (Commonwealth v. Great American Indemnity Co., 312 Pa. 183, 190-192, 167 A. 793, 796, 797; McClelland v. New Amsterdam Casualty Co., 322 Pa. 429, 432, 185 A. 198, 200). Nor is the right of use-plaintiff curtailed by the Act of June 23, 1931, P. L. 1181, which provides that where a performance bond is given by a contractor in connection with any public work, and such bond includes a condition for the payment of material furnished and labor supplied or performed, and no separate or additional bond conditioned for the payment of material furnished and labor supplied or performed has been taken, any person furnishing material or supplying or performing labor in connection with the work, and who has not been paid, may become a party to any action instituted on the bond and obtain judgment thereon for the amount due him. This statute was enacted at a time when the law. of the Commonwealth, under the decision in Greene County v. Southern Surety Co., 292 Pa. 304, 141 A. 27 (overruled in Commonwealth v. Great American Indemnity Co., 312 Pa. 183, 201, 167 A. 793, 800; see McClelland v. New Amsterdam Casualty Co., 322 Pa. 429, 432, 185 A. 198, 200), denied to those furnishing labor and material to a contractor the right, in the absence of express statutory authority, to recover on the contractor’s bond, either in their own names or in that of the obligee, and the Act of 1931 was intended, as the discussion attending its passage in the legislature shows (IV Legislative Journal, 1931, pp. 5442, 5812), to overcome that decision by granting permission to sue in such cases on the performance bond if there was no other' on which a statute permitted suit. As now declared by our decisions the right of the beneficiary to sue on such a bond exists at common law, and the act in no wise limited that right but, on the contrary, sought to establish it. Moreover, by its terms, the act is applicable only to those furnishing material or supplying or performing-labor in connection with the work, and not to a claim such as that of use-plaintiff, which, as already discussed, and, indeed, as insisted upon by defendants themselves, does not come within the category of material furnished or labor supplied or performed.

The judgment is reversed, and the record remitted with a procedendo.

* State ex rel. v. Padgett, 54 N. Dak. 211, 209 N. W. 388; Warner Co. v. Schoonmaker, 20 Del. Ch. 165, 174 A. 449; Lumbermen’s Mutual Casualty Co. v. Underhill Construction Co., 149 Kans. 684, 88 P. 2d 1107; Employers’ Liability Assurance Corporation v. Cannon, 173 Okla. 493, 49 P. 2d 103; Seibels, Bruce & Co. v. National Surety Corp., 63 Ga. App. 520,11 S. E. 2d 705; Southern Surety Co. v. Metropolitan Sewerage Commission, 187 Wis. 206, 201 N. W. 980; Employers’ Mutual Liability Insurance Co. v. Grahl Construction Co., 203 Wis. 315, 234 N. W. 326; Bay State Dredging & Contracting Co. v. Ellis & Son Co., 235 Mass. 263, 126 N. E. 468; Anderson v. U. S. Fidelity & Guaranty Co., 44 N. Mex. 483, 104 P. 2d 906; New Amsterdam Casualty Co. v. Detroit Fidelity & Surety Co., 187 Ark. 97, 58 S. W. 2d 418; Southern Surety Co. v. State ex rel. Travelers Insurance Co., 90 Ind. App. 309, 165 N. E. 444.